Comments for How to correct a prior year entry after the books and software year has been closed?

I did exactly what you said in your response to my last e-mail yesterday after I sent my e-mail. I just needed time to think it through and once I
did I was doing exactly what you said in you last response. It worked perfectly and everything is back to being in balance and in the proper
accounts. Thank you for your help, your site is awesome!

Stephanie Johnson

Sep 01, 2011Rating

How To Post Adjusting Entryby: Stephanie

Hello,

The original entry that should have been made to the property taxes would have been to credit the escrow liability account and to debit the property expense account which would have reduced the net income for the year. The net income flows to the balance sheet at year end through the retained earnings equity account.

Therefore, your entry at 12/31/10 would be to credit the escrow liability account and to debit the prior year adjustments equity account. This way the escrow account will show the correct balance, the current year property taxes won't be effected, and the equity account will now show the correct balance as well.

I hope that helps to explain! :)

Aug 26, 2011Rating

How Do I Post the Entryby:

Thank you for your response to my question regarding correcting prior year entries after closing the year on Peachtree. I am still not sure how to do the entry. Your suggestion to create a Prior Year Adjustments Equity account
sounds good but I still am not sure how to do the entry so that it does not affect the bottom line. Can you give me the actual entry (i.e. the
debit/credit) and tell me how it will affect the bottom line for 2010?

My goal is to get the escrow fee balance on the balance sheet to tie to the balance at 12-31-10 with the Mortgage company without affecting the actual property taxes paid in 2010, as that number is currently correct. The expense for 2010 is correct the asset acct which should only reflect the balance in the escrow acct is not because of our error in 2009 of not re-classing the taxes paid. We should have re-classed the actual taxes paid in 2009 to the property tax expense acct. I do not want to adversely affect
either the asset account or the expense acct. Is that possible being we are crossing over 2 fiscal years one of which cannot be opened?

I hope you can give me further assistance.

Aug 26, 2011Rating

Prior Year Adjustmentsby:

I believe you should be able to make an adjusting entry at 12/31/10 to reduce the asset account to it's correct year end balance by offsetting against a "Prior Year Adjustments" Equity Account.